CANADA ECONOMICS

ASEAN

Global Affairs Canada. September 8, 2017. Canada takes another strategic step in the Asia-Pacific region: exploratory free trade agreement talks agreed to with ASEAN nations

Ottawa, Canada - Canada is further deepening its strategic economic relationship with Asia-Pacific nations, which offer enormous potential for Canadian businesses and opportunities to create good-paying jobs for Canada’s middle class.

Exploratory discussions on Canada-ASEAN free trade agreement

At today’s 6th ASEAN Economic Ministers-Canada Consultation in Manila, representatives of all 10 ASEAN member states and Canada together agreed to launch exploratory discussions to determine the potential for an ASEAN-Canada free trade agreement. Canada is a Pacific nation and is stepping up its strategic commitment to trade diversification by expanding influence and economic footprint in this burgeoning, high-growth region. Canada has taken significant steps to bolster its influence within ASEAN, including by establishing a diplomatic presence in all 10 ASEAN member states and appointing a permanent ambassador to the organization itself. This announcement marks another important milestone in the Canada-ASEAN economic relationship.

New Canadian representative to APEC Business Advisory Council

Further building on Canada’s relationship with the Asia-Pacific region, the Government of Canada today announced the appointment of Ralph J. Lutes, Vice President, Asia, for Teck Resources Limited, to the APEC Business Advisory Council (ABAC). Mr. Lutes successfully competed in an open, transparent and merit-based process. He will play a key role in representing the interests of the Canadian business community throughout the Asia-Pacific region. ABAC provides a crucial interface between Canadian business leaders and their counterparts from APEC member economies, enabling dialogue on issues related to trade and economic cooperation.

Quotes

“Canada is a Pacific nation and is pursuing a comprehensive, strategic and progressive trade agenda throughout the region. An enhanced economic partnership with ASEAN will create good middle-class jobs and benefit our small and medium-sized enterprises by providing clear, stable and progressive rules of conduct so businesses can grow and expand in one of the world’s fastest-growing and most dynamic markets.”

- François-Philippe Champagne, Minister of International Trade

“As one of Canada’s representatives to the APEC Business Advisory Council, Ralph Lutes will play an important role in increasing Canada’s trade and economic cooperation with APEC and promoting progressive trade policies that benefit everyone.”

- Pamela Goldsmith-Jones, Parliamentary Secretary to the Minister of International Trade

Quick Facts

• ASEAN is a regional intergovernmental organization comprising 10 member states: Cambodia, Brunei, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and Vietnam.
• In 2016, Canada-ASEAN merchandise trade reached a value of $21.6 billion.
• ASEAN is one of the world’s fastest-growing economic regions, with a GDP estimated at over $3.1 trillion in 2015.
• The Philippines is the chair of ASEAN in 2017 and is responsible for coordinating ASEAN’s overall relationship with external partners, including Canada.
• This year marks the 40th anniversary of Canada’s status as a Dialogue Partner of ASEAN. Canada is one of only 10 countries with this important level of partnership.
• APEC’s 21 members are home to nearly 2.9 billion people who generate 60% of the world’s GDP and accounted for 84% of Canada’s total merchandise trade in 2015.
• APEC includes four of Canada’s top five trading partners: the United States, China, Mexico and Japan.
• ABAC brings together business and political leaders from APEC member economies who are focused on increasing trade and economic cooperation. Canada’s ABAC representatives are Suzanne Benoît, President of Aéro Montréal (appointed in 2015) and Ralph J. Lutes, Vice President, Asia, of Teck Resources Limited (appointed in 2017).

Global Affairs Canada. September 8, 2017.  APEC Business Advisory Council and biographical note

The APEC Business Advisory Council (ABAC), established in 1995, provides a forum for business and political leaders in the Asia-Pacific region to meet and discuss issues related to trade and economic cooperation. ABAC comprises as many as three individuals from each of the 21 APEC members, with business representatives appointed by APEC leaders. Canada’s ABAC representatives help advance Canadian business interests in the Asia-Pacific region. The Asia Pacific Foundation of Canada acts as Canada’s ABAC’s secretariat.

Biographical note

Ralph J. Lutes (BCom Hon, Queen’s University; LLB, University of New Brunswick). As Vice President, Asia, for Teck Resources Limited, Mr. Lutes is responsible for Teck’s corporate portfolio and presence in Asia, including oversight of marketing, macroeconomic and market research teams, corporate and government affairs, and development of new markets across the region, with an emphasis on China and India. In this capacity, he participates in APEC Mining Task Force meetings and is responsible for Teck’s role in this forum as a private sector partner of Natural Resources Canada.

Mr. Lutes has twice practiced with Canadian law firm Stikeman Elliott LLP, for a total of over 20 years, most recently from 2002-2011 at the firm’s Vancouver office. There, he was involved in mergers and acquisitions (resource and other sectors), finance (including capital markets, investment fund and derivative structures) and corporate reorganizations.

From 1980 to 1995, Mr. Lutes practiced at the firm’s Toronto, Hong Kong and Vancouver offices, managing the firm’s Hong Kong office from 1987 to 1990. During this time, he gained extensive experience in cross-border trade, investment and financing transactions, including those in China. From 2000 to 2002, Mr. Lutes was Vice-President, General Counsel and member of the board of directors of an early stage technology venture. From 1995 to 2000, he was Managing Director and Asia General Counsel of CIBC World Markets, based in Singapore.

In the course of his career, Mr. Lutes has served on governance boards of both public and private companies and non-profit organizations. He currently is Chair of the Advisory Committee of the Canada-China Business Council, Beijing chapter. He also developed and taught a course on corporate governance to MBA students at the University of British Columbia’s Sauder School of Business.

Mr. Lutes currently resides in Beijing, China.

AVIATION

The Globe and Mail. 11 Sep 2017. BOMBARDIER X BOEING. Quebec government stands behind Bombardier. Boeing’s trade complaint against Bombardier and its C Series airliner is a “frontal assault” on Quebec’s economy, says the province’s minister for the economy. Boeing Co.’s trade complaint against Bombardier Inc. and its C Series airliner is a “frontal assault” on Quebec’s economy, a senior minister in the Couillard government said as analysts weigh the ramifications of potential negative rulings going against the Canadian plane maker.
NICOLAS VAN PRAET



As the Canada-U.S. trade feud over Bombardier’s C Series jets deepens, Ottawa has, in recent weeks, threatened to scrap plans to buy 18 fighter jets from Boeing.
“What’s important to us is that we sell C Series,” Dominique Anglade, Quebec’s Minister of Economy, Science and Innovation, said in an interview Sept. 7 in Montreal. “We will do everything we can to support our industry. And this complaint is a frontal assault on our economy. We can’t accept it.”
Ms. Anglade acknowledged that Quebec is home to a number of aerospace companies, many of which do business with Chicago-based Boeing. But she said her government is unequivocal that it stands with Bombardier because it is the anchor of the sector. Quebec invested $1-billion (U.S.) for a 49.5-percent stake in the C Series program in 2016, an equity injection that helped the company steer through a cash crunch that might have threatened its future.
The comments underscore what’s at stake for Canada’s second largest provincial economy as it roars back to life after years of slow growth. Planes and other aerospace equipment are among Quebec’s top exports and C Series shipments are expected to help fuel a 7-per-cent increase in the province’s exports next year, according to Export Development Canada.
The dispute also has ramifications for other industries, said Riyaz Dattu, a lawyer with Osler, Hoskin & Harcourt LLP in Toronto. Bolstered by the aggressive position taken by the White House on trade issues with Canada, other U.S. companies in other sectors could follow Boeing’s lead and launch similar petitions, he said. » “A decision favouring Boeing would precipitate trade lawyers south of the border to counsel their clients to bring cases that in the past … would have been more difficult” to win, Mr. Dattu said. “It will embolden other U.S. companies.”
Canada is locked in a bitter trade feud with the United States over Bombardier’s C Series aircraft, a new 100- to 150-seat plane lauded as the first clean-sheet design of a single-aisle airliner in nearly 30 years. The issue has escalated in recent weeks as Ottawa threatens to scrap plans to buy 18 fighter jets from Boeing in retaliation and Boeing officials express concerns that Canada will “kick Boeing out.” What actions Quebec may be taking behind the scenes to support Bombardier aren’t immediately clear.
The U.S. Department of Commerce is investigating accusations by Boeing that Bombardier sold 75 CS100 models to Delta Air Lines Inc. at “absurdly low prices” while it benefited from unfair subsidies from the Canadian and Quebec governments. It has asked the U.S. government to impose anti-dumping and countervailing duties of about 79 per cent on C Series planes imported into the United States.
Commerce is scheduled to release its preliminary findings on whether to impose countervailing duties on Sept. 25.
A ruling against Bombardier is likely to slow the sales momentum of the C Series into the U.S. market, said Dan Fong, an analyst with Veritas Investment Research. But that doesn’t mean all is lost for the program.
Mr. Fong said interest by non-U.S. customers may offset any lost U.S. orders, particularly now that there are 18 C Series jets in service with a strong track record of performance. Even in the United States, a workaround could exist whereby a non-U.S. aircraft leasing company buys the C Series free of U.S. tariffs and then leases them to a U.S. carrier, Mr. Fong said.
In its petition, Boeing recounts how European consortium Airbus Group SE used state aid to enter the U.S. market and subsidize sales that led to the demise of U.S. plane maker McDonnell Douglas Corp. and forced Lockheed Martin Corp. to abandon the market. It suggests that failing to stop Bombardier could lead to the same outcome for the U.S. industry.
Many experts have countered that Boeing’s petition is pure hypocrisy because the company has benefited from billions in support from various levels of U.S. government. Boeing is upset about the C Series because it does not have an aircraft that can compete with it, airline analyst Darryl Jenkins has said. “It is trying to capitalize on current trade skepticism in a bid to undermine Bombardier, perhaps to allow it time to get back into a market it chose to abandon.”
Bombardier maintains it has done nothing wrong and that its financing arrangements with governments adhere to international trade regulations. U.S. trade laws were not really designed to address complex and highly engineered products such as aircraft, making it hard to predict rulings on this case in the preliminary stages, company spokesman Bryan Tucker said. He said Bombardier is focused on the final-stage rulings.
“At the end of the process, and given that the C Series will contribute billions of dollars to the U.S. economy and lower travel costs for the American public, we’re confident the ITC will reach the right conclusion,” Mr. Tucker said.
Two U.S. carriers, Spirit Airlines Inc. and Sun Country Airlines, are backing Bombardier’s right to sell into the United States. Neither carrier currently operates Bombardier-made planes but, in separate letters to Commerce and the ITC, they argued that imposing duties on C Series aircraft would ultimately hurt American travellers and urged decision makers to reject the complaint.

The Globe and Mail. 11 Sep 2017. U.S. defence industry’s rally may stall even as North Korean tensions flare
NOEL RANDEWICH, SAN FRANCISCO


A U.S. Air Force plane, top, flies with South Korean jets during a drill in July. U.S. President Donald Trump tweeted last Tuesday that he would allow for Japan and South Korea to purchase more military hardware.
SINEAD CAREW NEW YORK

Investors have flocked to U.S. defence stocks amid escalating tensions with North Korea and President Donald Trump’s promises to boost the military, but with towering valuations, their steepest gains may be behind them.
The S&P 500 Aerospace & Defense index has risen 23 per cent year-to-date, more than double the S&P 500’s 10-per-cent increase, and is set for its strongest annual gain since 2013.
Partly because of North Korea, the index is now valued at about 20.5 times earnings estimates for the next 12 months, its highest since 1999, according to analysts. While defence stocks may continue to spike briefly when rhetoric between the United States and North Korea is at its most aggressive, strategists question whether valuations can expand much more.
“To have significant outperformance, it would take largescale military operations, or a belief the global economy is significantly weakening,” said Jeff Morris, head of U.S. equities at Aberdeen Standard Life in Boston.
The defence sector’s fortunes may depend more on budgetary matters. If North Korea tensions stay high, it may be easier for a deeply divided Congress to pass the 2018 budget, Mr. Morris said.
Still, investors should be realistic about spending growth.
“The expectation is that you are going to have a larger increase in the defence budget, but I think some of that is a little too bullish,” said Morningstar analyst Chris Higgins, pointing to fiscal hawks in the Republican Party.
Mr. Trump tweeted on Tuesday that he would let Japan and South Korea buy more U.S. military gear, but government approval of weapon sales to foreign countries can take years.
The potential profit boost from a war with North Korea is difficult to estimate.
Such a conflict could require additional U.S. spending of at least $100-billion (U.S.), according to research firm Capital Alpha Partners. The military cost of invading and occupying Iraq from 2003 through 2010 was about $715-billion, it said, citing a Congressional Research Service report.
Lockheed Martin Corp., the maker of F-35 fighter jets and the Pentagon’s No. 1 weapons supplier, said in August that customers were increasingly asking about missile-defence systems.
But while the U.S. invasion of Iraq helped Lockheed increase 2003 sales by 19 per cent, according to the company’s quarterly filings, it did little for the stock price. The shares jumped 8 per cent in the week before the March 20, 2003, invasion, but were down 5 per cent a year later.
If a stock market correction occurs, the defence sector may prove more resilient because weapons are still must-have items for governments.
But the sector’s financial performance does not look poised to catch up with stock gains. While analysts expect S&P 500 aerospace and defence companies to increase earnings per share by 10.3 per cent in 2017, they see revenue growth of only 1.1 per cent, according to Thomson Reuters I/B/E/S.
“Maybe the bottom line is that the stocks are a little ahead of fundamentals,” said Sameer Samana, global quantitative strategist at Wells Fargo Investment Institute in St. Louis.

NAFTA

The Globe and Mail. 11 Sep 2017. Does the United States actually have a NAFTA strategy?
ANDREI SULZENKO Former trade negotiator and current executive fellow at the School of Public Policy, University of Calgary


MARCO UGARTE/AP
Canadian Foreign Minister Chrystia Freeland, left, and Mexican Economy Secretary Ildefonso Guajardo Villarreal, centre, have resisted the NAFTA renegotiation demands made by U.S. Trade Representative Robert Lighthizer on behalf of the Trump administration.

Perhaps it’s too early to discern, after just two negotiating sessions among the NAFTA partners, whether the United States has a game plan for reaching an agreement, or whether they are just going through the motions with a view to pulling the plug on the hopeless task of a lopsided “America First” deal.
Either way, the clear tactical objective is to play emotionally to the electoral base that supports U.S. President Donald Trump rather than to professionally embrace the opportunity of improving an already beneficial North American free-trade agreement.
How else do you explain the amateurish threat to abrogate the trade pact even before the battle lines are clearly drawn? It’s amateurish if the game plan is merely an attempt to shake down Canada and Mexico in the hope that they’ll cave in to American demands. That will not happen, as no agreement is better than a bad agreement, particularly with multilateral World Trade Organization rules backstopping NAFTA.
For example, the U.S. demand for American content in NAFTAmade cars is laughable because auto companies would be better off paying the alternative, much more flexible, WTO “bound” tariff of 2.5 per cent into the U.S. market, with potentially zero NAFTA content.
Further, the self-inflicted downside for the United States of this kind of “my way or the highway” gambit is that it further raises the bar with Mr. Trump’s electoral base when it comes to ultimately proclaiming success.
If anything, the United States should be dialling down the rhetoric and preparing the public for a modernized agreement with enough political “gets” for all sides to declare victory. Indeed, based on public reports, it appears that there is a deal on the table if negotiators and their political masters have the wit to see it through.
The alternative explanation is that such threats, coupled with extreme negotiating positions, are designed to facilitate failure at the negotiating table and subsequent U.S. abrogation of the agreement. That would really fulfill the election promise of dealing with the United States’ allegedly worst-ever trade agreement, even if it translated into a net negative for those who voted for the President.
Ironically, though, that scenario could play out well in the end for all sides despite the roller-coaster ride in the meantime. Here’s how it would work.
Negotiations fail. Instead of shrugging and saying “Well, we gave it a good try” (in reality, the bullying backfired), the President gives notice of NAFTA abrogation. The inevitable response of a constitutional challenge is brought forward, claiming that the President has no such unilateral authority, with Congress having at least concurrent, if not ultimate, authority. (U.S. constitutional history is unclear on the issue.)
If the Supreme Court ultimately favours congressional authority, that would be a major setback for the scope of presidential power. It would also probably put abrogation to the side as members of Congress generally appear to be pro-NAFTA – or at least not antiNAFTA. Congress is also not favourably disposed to trying to make a deal with the President.
If the Supreme Court sides with the President, it would be a hollow victory as Congress still retains the legislative authority that gives practical meaning to trade agreements. It is unlikely that Congress would choose to dismantle NAFTA-implementing legislation.
Regardless of which way the decision goes, the President would be able to put a tick mark beside an election promise, Congress would show who’s boss on trade, and Canada and Mexico would be back at the status quo ante.
The downside, of course, is that all three countries would have gone through a lot of risk and uncertainty for the sake of an individual’s ego. But in terms of playing the game, that’s at worst a draw for Canada and Mexico with the king in check.

BLOOMBERG. 11 September 2017. Trudeau Teams Up With Canadian Labor in Push for Nafta Reforms
By Josh Wingrove

• Prime Minister seen wooing 2019 voters via approach to talks
• Better worker protection is ‘red line’ in negotiations: Dias

In Mexico City’s Nafta talks last week, few Canadians had a higher profile than Jerry Dias.

He spoke to a labor rally and a conference. He met at length with Canada’s chief negotiator, Steve Verheul, over red wine and bar nuts. He held court with reporters regularly.

Yet Dias is no government minister or aide. He’s the head of Unifor, Canada’s largest private-sector union, and hates the North American Free Trade Agreement, whose second round of negotiations concluded Sept. 5. And he’s at the forefront of Prime Minister Justin Trudeau’s renegotiation strategy -- a reminder that, like Trump, Trudeau has his own economic interests and domestic politics to cater to. That means giving labor a prominent seat after Trump spurred new Nafta talks.

Trudeau, the country’s most left-leaning prime minister since his father, has repeatedly said the new Nafta must be more progressive. Among its core objectives, Canada has proposed including environmental provisions and those related to gender and the rights of indigenous peoples.

But it’s labor that’s been at the forefront. Enter Dias.

Speaking in Mexico City, the combative union leader declared Nafta a failure for workers in all countries, insisted Canada would press for higher labor standards in both the U.S. and Mexico and called Donald Trump “crazy” while sounding a lot like the U.S. president in decrying job losses.

Trudeau is indeed pressing for stronger labor rights, a stance that will add another hurdle to reaching a timely agreement as Dias essentially sets the tone on the government’s behalf.

“They know I’m here today, they know exactly what I’m going to say today,” Dias told reporters after speaking to a rally of Mexican workers, demanding higher wages for them. He insists Canada will walk away from the negotiating table without major labor changes. “It’s a red line.”

For Votes

With U.S. and Mexican elections looming, the three countries are accelerating talks in hopes of reaching consensus before the end of the year. Labor’s prominent role underscores Canada has its own political considerations too. Trudeau won power by shifting his centrist Liberal Party to the left and has since wooed labor.

“Comparatively to the last government, it’s night and day,” said Hassan Yussuff, head of the Canadian Labour Congress and an appointee to Foreign Minister Chrystia Freeland’s Nafta advisory panel. Others tapped for the panel include former Conservative lawmakers, whose party was at odds with the labor movement while in government, and a senior figure from the New Democratic Party, typically the most closely aligned with labor. “Her natural ability to work with labor is something very welcome to us," Yussuff said of Freeland.

Adam Taylor, a principal at trade consultancy Export Action Global and former official in the last government, said domestic politics is driving the labor courtship. “It is partly for votes,” he said. “Their coalition of voters probably will accept free trade, but want it to be grounded in all the progressive issues the Liberals are bringing to table.”

Among Canada’s proposed Nafta changes is an overhaul to U.S. and Mexican labor law, according to an official familiar with the talks, including so-called U.S. “right-to-work” rules, derided by labor leaders, that ban unions from requiring workers to pay dues. The U.S., while sure to balk at that, is with Canada in pressing for higher wages -- though Mexican Economy Minister Ildefonso Guajardo said there’s no consensus on how to do that.

“On this you’ll have two groups of ideas that could contrast,” he told reporters as the second round of talks concluded. Those include “institutional improvements in labor rights” and a process of forcing through higher salaries, he said. He opposes the latter measure.

Courting Labor

After Trump’s election, Trudeau shuffled his cabinet to prepare for talks -- making Freeland his foreign minister and leaving Nafta in her hands. Shortly afterward, the Trudeau government invited Yussuff for a meeting. He spoke with Trudeau’s two top aides, Gerald Butts and Katie Telford, and the prime minister himself. Yussuff said they wanted to know whether or not his labor group would work with them. It’s clear labor was part of Trudeau’s plan.

“He got elected by the way because he had the right messaging both to workers and to a large extent to Canadians -- and he realized, hey, I might as well stay there, I got elected on it,’” Yussuff said. “It also sends a good message to other people on the business side -- maybe they’re being too selfish and arrogant.”

Cameron Ahmad, a spokesman for Trudeau, said his senior aides have met regularly with Yussuff and other labor leaders. A strong and respectful working relationship with Canada’s labor movement “is critical for our government," Ahmad said.

In the lead-up to talks, government officials speaking on condition of anonymity said labor leaders in particular had the ear of the government.

“This one is left-of-center,” Dias said of Trudeau’s typically centrist Liberal Party. “The Canadian government is by far the most progressive of the three, and we’re here to work with them and they know that we’ll go right off the walls if in fact it’s all rhetoric and it becomes the status quo” with Nafta.

Red-Line

In the 2015 election, the incumbent Conservatives were unpopular and Trudeau moved to the left -- they pledged an expanded national pension program, deficit spending and a tax hike on top earners -- to squeeze out the New Democrats and contrast the conservatism of incumbent Prime Minister Stephen Harper. His Nafta strategy suggests he’ll do the same thing in Canada’s next election in 2019.

Speaking to reporters in Mexico City, Freeland demurred when asked for details of negotiations so far, though cited labor as a commitment.

“All of us want to come out of this negotiation being able to say to workers in our countries, ‘We have achieved a deal that will improve your standard of living,”’ she said. “That is an essential foundation for going forward.”

The pledges Trudeau is making to Canadian labor will make it tougher for him to compromise at the Nafta table. Yussuff said the government will need to press Mexico in particular to honor pledges for labor reform, while Dias insists all three countries need to honor eight core conventions, including the right to organize, laid out by the International Labour Organization to make Nafta work. Dias wants raises big enough that Mexican auto workers can all afford to buy the cars they make. The prominence of Canadian labor suggests Freeland is largely on-side -- and is now pressing the issue at the Nafta table.

“This is an opportunity to show, hey we’re seriously committed to working with you to make the relationship much stronger,” Yussuff said of Trudeau’s ties with labor during Nafta talks. "At the end of the day, they’re not negotiating with themselves. They have to convince Mexico and the U.S. to equally agree to these changes."

— With assistance by Nacha Cattan

INTERNATIONAL TRADE

THE GLOBE AND MAIL. SEPTEMBER 10, 2017. China used research mission to test trade route through Canada’s Northwest Passage
PEI XIN/AP
ROBERT FIFE  AND STEVEN CHASE

OTTAWA - China's official government news agency says Beijing used a scientific icebreaker voyage through Canada's Northwest Passage to test the viability of sailing Chinese cargo ships through the environmentally fragile route that links the Atlantic and Pacific oceans.

Xinhua News Agency, often used to deliver messages on behalf of the Chinese state, lauded the Sept. 6 completion of the first-ever Chinese voyage through the Arctic waterway, saying the Snow Dragon icebreaker "accumulated a wealth of experience for Chinese ships going through the Northwest Passage in the future."

Beijing's state news agency said the Arctic route through Canadian waters can reduce the delivery time for Chinese cargo ships by 20 per cent.

"It opened up a new sea lane for China," the news agency said. "From Shanghai to New York, the traditional route that passes through the Panama Canal is 10,500 nautical miles, while the route that passes through the Northwest Passage is 8,600 nautical miles, which saves 7 days of time."

Xinhua also reported that China sent six merchant ships through Russia's Northeast Passage this summer as the world's second-largest economy hopes to take advantage of melting Arctic sea ice to speed the delivery of goods to North America and European markets.

Canada demands that foreign vessels ask permission before sailing through the Northwest Passage. Foreign Affairs Minister Chrystia Freeland's office said last week that Canada granted its approval on the basis that China was conducting scientific research. A team of Canadian scientists were also on board as well as a Canadian navigator.

A senior government official, who was not authorized to speak on the record, told The Globe and Mail that "China may say whatever it wants to a domestic audience [but] that does not mean it reflects the reality of what happened here."

Adam Austen, the press secretary to Ms. Freeland, echoed the senior official's viewpoint, saying the Snow Dragon mission was solely a "scientific expedition" and China's desire to use the Northwest Passage for shipping is not a done deal.

"All commercial voyages through Canada's territorial waters, including the Northwest Passage require an application," Mr. Austen said. "While we permit commercial traffic through our domestic waters, we expect that ships comply with our strict laws on safety, security and the protection of the environment. All cases are evaluated on an individual basis."

Arctic expert and professor Rob Huebert, who tracked the Snow Dragon's voyage using satellite imagery, said he was surprised the Chinese were so blunt in revealing their clear intentions for the Northwest Passage.

"They are preparing for a very substantial increase in the amount of shipping. It is obvious this is going into the planning to a degree that we don't see in Western shipping companies," Prof. Huebert said. "They have given us clear notice this is going to happen."

Prof. Huebert, who teaches at the University of Calgary's Centre for Military and Strategic Studies, said he is not convinced the Canadian government is prepared to handle large-scale Chinese shipping through this waterway and to ensure China respects the Arctic Waters Pollution Prevention Act.

Environmentalists have expressed concern over the risks of increased ship traffic in the pristine Arctic, such as oil spills and sooty emissions.

"We need to get the Arctic patrol vessels built. We need to get the Coast Guard better funded and we need the facilities for better surveillance and enforcement capability," Prof Huebert said.

For some years, state-owned Cosco – which is China's largest shipping group – has been exploring the potential of the Arctic as a new and reliable global trade route.

Using the Arctic would allow Chinese cargo ships to provide faster delivery without having to worry about monsoons in the Indian Ocean, armed pirates on other routes or paying fees to pass through the Suez or Panama canals. In early July, Chinese President Xi Jinping and Russian Prime Minister Dmitry Medvedev agreed to explore co-operation on the northern sea route to build a "Silk Road on Ice."

Chinese state media have called the Northwest Passage a "golden waterway" for future trade; 90 per cent of China's exports are by ship. China has no Arctic territory, but has been attempting to play a larger role in the region and gained observer status at the Arctic Council in 2013.

Despite concerns about the effect of increased shipping traffic on the fragile Arctic environment, there is little that Canada can do to prevent countries from using the Northwest Passage as a trade route, according to University of British Columbia Professor Michael Byers.

However, Prof. Byers said the fact that Beijing sought Canada's approval to enter the Arctic waters strengthens Ottawa's sovereignty claims to the Northwest Passage.

"If anything, Canada's legal position has been bolstered by the fact that the Chinese were so willing to work with us. They waited a whole week before they got the letter [of Canadian government approval] before entering Canadian waters," Mr. Byers said. "Every time another country works with us, they are at least implicitly recognizing that we are the state in control, that we have rights in the Northwest Passage. So this voyage is actually a good thing from the perspective of Canadian sovereignty."

Prof. Byers acknowledged though that it is in China's interest to seek Canadian approval because it strengthens Beijing's claims to the Hainan Strait, which, as with the Northwest Passage, the United States considers international waters.

"That is actually the reason why China is respecting us in terms of not challenging our position [on the Northwest Passage]. They are not challenging our position because if they challenged our position, they would be weakening their position in the high Hainan Strait," he said.

The Hainan Strait is an important shipping route connecting the South China Sea to the Gulf of Tonkin and one that China claims as internal waters.

Canada claims sovereignty over the Northwest Passage based on historic title – a status conveyed by the Canadian Inuit's usage of those waters. This claim has long been challenged by the United States, which considers the passage an international strait through which Americans are entitled transit rights.

Nonetheless, the United States does notify Canada when its vessels are passing through the channel.

Prof. Huebert said it will be important for Canada to ensure that Chinese shipping companies request Canadian authorization before they venture into the Northwest Passage.

"If [China] bring containers in, the first one will be important in that they follow our procedures for requesting permission," he said. "If they start coming in and get sloppy and they start not asking for consent, then the Americans will quite rightly say you are not enforcing it and therefore it is an international straight. And that is the real danger."

China's Arctic plans fit with a broader effort to create new trade shortcuts. Last year, Beijing send the first container train from eastern China to Iran – a land journey 30 days shorter than by water.

With files from Xiao Xu

COMPANIES

The Globe and Mail. 11 Sep 2017. AMAZON. Canadian mayors risk becoming pawns in Amazon’s NAFTA play. NAFTA talks are a chance for Amazon to regain what it lost when Trump abandoned TPP. [Donald] Trump and [Jeff] Bezos now share some common interests – most notably forcing Ottawa to dramatically raise the value of goods Canadians can buy online from the United States without paying taxes and duties.
BARRIE McKENNA

From Vancouver to Toronto, Canadians mayors are falling over one another to persuade tech giant Amazon to pick their city for the company’s planned “HQ2.”
And why not? The Seattlebased company is promising to create as many as 50,000 jobs and invest up to $5-billion (U.S.) over the next 15 years to build a second corporate campus in North America.
For Toronto’s John Tory and the other big city mayors, that’s like winning the Powerball lottery.
It’s a long shot that Amazon would locate such a key piece of its business outside the cozy confines of the United States, particularly in the current political environment. Picking Toronto would amount to Amazon founder and chief executive Jeff Bezos spitting on U.S. President Donald Trump’s America First economic agenda. But the headquarters competition creates an intriguing subplot. As long as Canadian cities are in the race to woo Amazon, their mayors will find it hard to resist endorsing everything the U.S. company wants in the continuing renegotiation of NAFTA.
That would naturally include such measures as higher Canadian duty-free thresholds on cross-border purchases, freer movement of data and harmonization of Canadian and U.S. intellectual-property rules.
It would also likely result in unwinding cultural protections and fewer restrictions on locating data farms in this country for privacy and security reasons.
It’s a long and controversial list. But for Amazon, securing those protections would likely be a precondition for moving to Canada.
If Toronto, Vancouver, Montreal or Ottawa want a legitimate shot at the prize, they may feel compelled to endorse the key demands of the U.S. tech sector in a NAFTA 2.0.
This could also put the mayors in an awkward spot. Amazon’s best interests are not necessarily the same as those of other Canadians, including some members of the domestic tech industry, traditional bricks-and-mortar retailers and advocates of stricter online privacy rules.
E-commerce is one of the least-discussed, but vitally important pieces of the NAFTA negotiations.
Mr. Trump has had a fractious relationship with Mr. Bezos, who also owns The Washington Post. The newspaper’s critical coverage of his candidacy and now his presidency has often enraged Mr. Trump. During last year’s election campaign, he threatened that Mr. Bezos would have “such problems” if he won the White House.
But Mr. Trump and Mr. Bezos now share some common interests – most notably forcing Ottawa to dramatically raise the value of goods Canadians can buy online from the United States without paying taxes and duties. The current limit is $20 (Canadian). The Trump administration wants that raised to $800 (U.S.), matching its own threshold and providing a lucrative boost for U.S. online retailers, Amazon among them.
Raising the limit would also address Mr. Trump’s desire to reduce the U.S. trade deficit, which he blames for killing U.S. jobs. Canadian retailers have warned the change would devastate their industry.
The interests of Mr. Trump and Mr. Bezos are also converging in other areas of the new economy. For Amazon and other tech and e-commerce companies, the renegotiation of NAFTA is an opportunity to regain what they lost when Mr. Trump walked away from the Trans Pacific Partnership trade agreement earlier this year. The TPP, which Canada signed, included groundbreaking rules governing e-commerce and intellectual property.
Since then, U.S. negotiators have quietly placed many of the same TPP provisions back on the table in the NAFTA negotiations. Among other things, the TPP prohibited restrictions on cross-border data flows and limited local data storage rules. The agreement also prohibited forced disclosure of computer source codes, barred new duties on electronic transmissions, extended so-called “national treatment” rules to online services and required member countries to criminalize cybertheft of trade secrets.
Some U.S. tech companies are now pushing for rules that go even beyond what’s in the TPP.
The danger for Canada’s mayors is that by aggressively wooing Amazon, they risk becoming unwitting pawns in a larger battle over the rules of the road for the new economy in North America.
Then again, maybe winning the lottery is worth all that.

HOUSING

The Globe and Mail. THE CANADIAN PRESS. SEPTEMBER 11, 2017. Housing starts in Canada speed up in August

OTTAWA - Canada Mortgage and Housing Corp. says the annual pace of housing starts in August increased compared with July.

The agency says housing starts came in at a seasonally adjusted annual rate of 223,232 units for August, up from 221,974 in July.

The increase came as the seasonally adjusted annual rate of urban starts increased by 0.8 per cent in August to 207,524 units.

Multiple urban starts increased by 2.7 per cent to 145,618, while single-detached urban starts fell 3.2 per cent to 61,906 units.

Rural starts were estimated at a seasonally adjusted annual rate of 15,708 units.

The six-month moving average of the monthly seasonally adjusted annual rates of housing starts increased to 219,447 in August compared with 217,339 in July.

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LGCJ.: